MR. HADLEY: I can talk a little bit about the meetings this
morning. The meeting between the President and the Chancellor this
morning in terms of the subjects that were discussed, they were pretty
clearly covered by the two leaders during their press conference. I
think what I can add was, they had a very interesting discussion about
their impressions of key leaders. They had a good exchange about
Vladimir Putin -- who the President is going to see on Thursday --
their assessment of where he is, what his vision is for Russia. They
had a very good exchange about President Abbas and Prime Minister
Sharon in the context of the Middle East, and whether they had the
commitment to the vision of peace that the President has talked about
in terms of the two-state solution. Each of these men are terrific
politicians and they exchanged, politician-to-politician, their
assessment of these leaders, who are all facing important decisions.
And it was, I think, a useful discussion for both.

The lunch was a very informal affair. The two Presidents and their
wives had a very pleasant, I think, and enjoyable exchange, more
personal than business. There was then the roundtable with a series of
men and women in their 20s and 30s, a good exchange, questions and
answers to the two leaders that went about an hour and a quarter --
scheduled for about an hour -- about an hour and a quarter. And that
was an opportunity really for the two leaders to speak to the next
generation. And a number of the questions that you'd expect came up
there.

So that's the day. I think the characterization I would put on
particularly the morning discussion was a very candid, constructive,
helpful conversation among the two leaders, who clearly got on well and
had a lot to say to one another, and a lot of listening to do, and a
lot of listening was done on both sides. It was a very positive --
positive day for the two men, and for U.S.-German relations. That's
what I would say.

Q What is your assessment of Putin, of what he is doing? And
what was Chancellor Schrder's assessment?

MR. HADLEY: I'll try and kind of give you a step back. I mean,
it's a complex relationship. Look, we have a very constructive
relationship with Russia; we have to start with that. We have -- the
two Presidents, working together, have solved a number of problems in
the relationship and have also identified some important areas of
collaboration where we are collaborating. Counterterrorism is one; you
know about it. Counterproliferation is another. They are one of the
core group of the Proliferation Security Initiative. That's one of the
important accomplishments we thought we achieved in terms of bringing
the two countries together to deal with the proliferation problem.

Russia has been constructive in connection with Iran. Russia is
also a member of the six-party talks in terms of North Korea. We were
able to deal with the ABM Treaty; we have the Treaty of Moscow, which
both sides have agreed to lower their strategic nuclear arsenal. So
this is a relationship that is constructive, that has common areas of
endeavor, and has been able to solve problems.

It is also the case that we've had for a long period of time a
dialogue, mostly private, but sometimes public, with President Putin
and the Russian government about democracy and freedom, and their
progress along that route. And President Putin has said publicly -- he
said it again yesterday -- that his vision for Russia is for a
democratic Russia. That's what he has said. He said that it has to
reflect Russia's history and culture. Again, our President has said
that we understand that democracy will not look the same in all
countries, that it will reflect -- it cannot be imposed, it has to be
found and fought for and developed internally, and it will reflect
culture and history.

And I think it's important to say that for all the discussion there
has been about Russian democracy, this is not the Soviet Union you're
seeing. That is history. This is a different Russia. That said, one
of the things we've also made clear, and the President was trying to
make clear the other night, is when President Putin says that he's
committed to democracy, people will, obviously, watch and see how that
is manifested in actions. And one of the things we know, from being
students of countries finding their way to democracy over the last 50
years, is you begin to see hallmarks of a democratic society --
countries that safeguard the press, that safeguard freedom of religion
and rights of assembly, that respect minority rights, that have
alternative checks and balances on the central government. Those are
the hallmarks of democracy. And one of the things we will all be
looking for is Russia, over time, moves, hopefully, towards democracy,
as President Putin says he is. It's the way we begin to see m

And the last thing I'll tell you is, the President said that this
ought to be part of the agenda that the United States is talking to
Russia about, but also the European countries, as well, because, again,
we're committed to common values and we all believe -- let me say one
last thing -- that a free and democratic Russia is better for Russia,
it's better for us. And I think the thing we hope Russia can
understand is that in the 21st century -- everyone wants a strong
Russia, but in the 21st century a strong Russia will come the way the
strength of other states come, it will come through democratic
structure. And hopefully that's something they will understand, as
well.

Q -- German seat in the Security Council of the United Nations?

MR. HADLEY: In the conversations I've -- the question was whether
the Chancellor raised the issue of a German seat in the Security
Council. And in the conversations I was in, which I think is all of
them, that did not come up. One of the reasons it may not have come up
is the German position is clear and our position is clear; this is not
an area where we've had any disagreements.

Q Steve, the President and Chancellor Schrder said today that
they agree on the ultimate goal with Iran. Did they make any progress
in agreeing on how things should proceed from here out with Iran?

MR. HADLEY: There was a good discussion about that. I don't want
to lose the point that, as they said in their press conference, there
is agreement that Iran needs to be non-nuclear, it needs to give up its
nuclear ambitions, that it needs to begin to listen to its people.
Obviously, we're concerned, and the Europeans are concerned, about
Iranian support for terror. The President made clear we support the
three-party talks. We also continue to make clear that these are talks
that need to head to a solution, and that solution needs to involve the
permanent cessation of enrichment and foreswearing of reprocessing.

There was a lot of discussion about where we go from here. And
there's some ideas that have been floated around. You have seen some
of them in the press, discussions about should there be a mix of
carrots and sticks, and who should the carrots come from and what
should they be. And, as I say, the President did a lot of listening.
I think the Chancellor did a lot of listening. This has been an issue
that we've talked about on every stop on this trip. And the President
has really got to go back and think about it, quite frankly.

And let me just say one last thing. This will be an ongoing
discussion. Condi is going to -- the Secretary of State is going to
meet with her -- some of her counterparts on the margins of this March
1 meeting in London, and I expect this will continue to be a topic at
that time.

Q There seems to be an increasing sense of urgency here. Was
there any talk of a timetable or how quickly things need to move?

MR. HADLEY: There wasn't a -- look, everybody knows this is a
serious problem, and we need to address it. But I didn't get a sense
of an urgency or anything. I think there is time to do this in a
thoughtful way, because we want these -- as the President said, we want
this process to succeed.

Q You said the President needs to go back and think about it.
Think about what, specific ideas, an agenda?

MR. HADLEY: I think he heard a lot of specific ideas about what
the next steps would be. Some of it has come out in the press, and
that's something that he needs to give some consideration to, and I
think that's what he'll do.

Q Will the President tomorrow raise with President Putin any
concerns about his treatment of the Baltics?

MR. HADLEY: Well, I think there's a general question that you see
in terms of the Baltics, you saw it in connection with Georgia, you saw
it against -- in connection with Ukraine, which is, Russia, over time,
getting the right relationship between it and now neighbor states that
used to be with Russia as part of the Soviet Union. And there are,
obviously, issues that Russia has with all three of those states. And
our general approach has been, and will continue to be, that these are
sovereign states -- and I think Russia acknowledges that -- and
therefore, these issues have to be resolved in a peaceful way, free of
coercion. And that's been our policy. So I think there will be
ongoing discussions, but I think the basic policy framework is pretty
clear and, I think, largely shared with the Russians.

Q Back on Iran, the President did seem today, in answer to that
last question -- an endorsement of the general notion of a negotiating
process with some tactics in it that would include economic
incentives. It does sound as if he moved a little, and then Chancellor
Schrder certainly sounded as tough as I've ever heard him on Iran. Is
there a sense that there's a coming together here -- am I reading too
much into it?

MR. HADLEY: I think there's been a convergence. There is
certainly convergence on the importance -- I think two things; one, I
think there's a convergence on the importance of us being clear on the
goals and wanting to make sure that the three countries, in discussion
with Iran and the United States, really have a clear understanding of
what the goals are and share them. And I think that's an
accomplishment here. I think if there was some uncertainty about that
going into these meetings, I think that has been resolved.

Second, I think that the -- and that resolve in that we have an
agreement on what the goals are and the need to be speaking with one
voice very clearly to Iran. I think there's a kind of stereotype out
there that if you want carrots, you go to the Europeans; if you want
sticks, you go to the Americans. And I think what they all agreed on
was we have to be also clear that we're all on board in the tactics of
play, that there will be some consequences if the -- if Iran does not
give up its nuclear ambitions. And the question, of course, then
becomes, do you go to the Security Council, what would follow from
that. But also, as has been reported in the press is right, there was
also a discussion about carrots and what should those be and who should
provide them, because that's an issue, as you know, the Europeans have
raised, and there was a good discussion about that, a good exchange on
that.

Q Could I just follow up then and try to push you a little more
on that?

MR. HADLEY: Sure.

Q Is that to say that the President wants a better sense of some
sequencing here, not negotiation without a clear endpoint, but a coming
together, a convergence, as you say, on what the end game is, what the
goal is, and then maybe allowing some carrots along the way, as long as
they're part of the negotiation sequence that has an endpoint and a
consequence if they fail -- is that a fair reading?

MR. HADLEY: It's close. Let me re-say it because it's the way the
President said it, actually, in one of these meetings. I think it's --
and I'm not quoting him, but I think my characterization of what he
came here is he wanted to make sure we share the same goal and we're
clear about that. And I think he got some clarity on that. Second, he
wanted to emphasize the importance that we all speak to the Iranians
with the same voice, and are all knit up, and I think he got some
clarity on that. Third, since the Europeans are conducting this
discussion with the Iranians, he wanted to have a clear idea of what
their strategy was, where the talks were, where they were on the
discussion and what was the European strategy. And I think he got some
clarity on that.

And then, finally, the issue that has been raised is -- and as he
said -- we support what the Europeans are doing, we want them to
succeed, and the question is, how can we help? And there was a lot of
discussion about what that might look like. And it's not just a
question of the carrots and sticks discussion, but it's also a question
of tactics -- what is the right approach, and what is right role for
the United States that can be constructive and helpful. And I think he
got some good exchanges on that discussion. And he will need to decide
now where to take that.

Q Let me take one more whack at it. Is the President now open
to the idea that the United States, itself, would offer carrots?

MR. HADLEY: I think where he is, is he's heard a lot of
suggestions, had a lot of discussion, and he's, I think, going to have
to go back and give some thought. He may have some views right now;
he's a decisive guy. He hasn't shared them with me. But I think he
heard a lot. He came here to listen and I think he's obviously got
some ideas. But I think he wants to go back and think about it and
talk to his national security team, not all of which was here.

Q Can I follow that, specifically? Stephen, you said -- let's
stipulate that the goal is the same and that you want to speak with one
voice. The question is specifically about carrots -- and the President
sounded in the press conference like he was rejecting the notion that
we need to offer incentives to Iran. He sounded very forceful on
that. But now you're sounding like he wants to go back and perhaps
entertain the possibility of incentives. Am I misreading it?

MR. HADLEY: Here's what I think I said. One, you heard what he
said, and this is a President who says what he means. What I've been
trying to say is, he wanted to be clear about goal, clear about single
voice, he wanted to hear what the European strategy was. And
obviously, he said, we want it to succeed and he wants to help.

He got a lot of discussions about where those discussions are
going. A lot of ideas were presented. And that's something he's going
to take back and think about it. Where he is, he told you where he
was. I think his words are -- I was trying to describe what happened
and what he heard.

Q He didn't reject any of these ideas that we should offer
incentives?

MR. HADLEY: He was in a listening mode, listening to these guys,
talking to them. You heard what he said at the press conference.
That's where we are, so far as I know it.

Q Jacques Chirac was pretty direct yesterday in saying that
Europe wants to end the embargo. Was Schrder as direct in the
bilateral today?

MR. HADLEY: I'm sorry.

Q Chirac was pretty direct yesterday in the statement about
wanting to end the arms embargo. Was Schrder as direct today, and
where did that talk go?

MR. HADLEY: You know, there was good discussion yesterday about it
in a number of the meetings. I think Chancellor Schrder was in one of
the meetings where it was discussed. It didn't really come up today, I
think mostly because it had been pretty well covered yesterday.

Q Either today, or perhaps your colleague can answer from
yesterday's meeting at the EU, did the dollar come up? It seems to be
a concern amongst the Europeans, the falling dollar.

MR. HADLEY: It didn't come up in the discussions. I think -- I
think the President was -- wasn't he asked about it in the press
conference? But it did not come up as a subject of the discussions
with the Chancellor today.

Q Can your colleague answer about the EU meeting yesterday,
perhaps?

MR. HADLEY: My recollection, again, was that the dollar did not
come up in the discussions yesterday -- did not come up. This is not
an area -- you know, this is an area where our policy is pretty clear.

We've got, what, about two more?

Q One more over here, please.

MR. HADLEY: Sir.

Q -- on multipolarity. The President spoke in his last
interview in the States about his discomfort with multipolarity, the
idea, et cetera. Mr. Fried brought it up again, said it's an 18th
century, 19th century regressive idea. Did the President and Mr.
Schrder, or the President and Mr. Chirac talk about the problems he
sees in multipolarity?

MR. HADLEY: It didn't come up. It was interesting, the -- there
was -- in the conversations that the President had with this group of
men and women, 20 to 30, I think he used a phrase which, I think, was
interesting. He said -- he was asked about American power. And he
said, look, America has a lot of influence in the world, and he wants
to use it to achieve important objectives, and he wants to have
partners who can also use their influence towards the same objectives.
And I think that's very much the way the President sees it.

This is an issue not of multipolarity or checking folks, because
this is a situation where we have states that basically share common
values and are trying to go in the same direction. And what he would
like to do is have a situation where we're all using our influence in a
coordinated way to achieving those objectives. I think that's how he
sees the issue.

We've got about two more. One way in the back, and one second to
the back.

Q What's the administration view of that Lieberman and McCain
resolution calling on the President to push Russia out of the G8 unless
Russia demonstrates a firm commitment to democracy? Are you aware of
that resolution?

MR. HADLEY: I read about it in the newspaper -- I'm aware of it.
And I don't really have anything to add to the answer on Russia I
gave.

Q I just wanted to ask about the way the President is
approaching the Putin meeting tomorrow. Listening to the roundtable,
it sounded like it was kid-glove treatment. You know, we like
democracy, but really anything you do is okay. Is he going to be
forceful about it or --

MR. HADLEY: Well, I thought he was pretty clear about it in the
speech he gave on Monday, and you all wrote a fair amount about it.
And this is a President who is pretty clear and straightforward about
what he believes and what he's going to say. I think you could -- you
read it in the speech and you all wrote about it. I don't have a lot
to add on that one.

Probably about two more, and then we'll go. Yes, ma'am.

Q I wanted to ask, is it fair to say that as a result of all
this listening the President has been doing in Europe, that his -- he
has a broader idea of the number and kind of options on the table in
dealing with Iran?

MR. HADLEY: You know, I can't improve on the answer I gave because
it's what he heard. Sorry.

Last one.

Q Can I just follow up about the dollar? The President has a
strong dollar policy, and the Korean Central Bank announced yesterday
that it was diversifying out of the dollar. Has the U.S. done anything
to be in contact with Asian governments or Asian central banks or other
central banks to impress upon them the President's commitment to the
strong dollar? And do you buy into the argument that says, at some
point, the extent to which China, in particular, buys dollars, makes
the U.S. vulnerable to push-backs from Beijing if it's unhappy with the
way in which the U.S. conducts national security policy?

MR. HADLEY: As you know, the Treasury Department does a lot of the
issue with respect to the dollar. And we've been on the road; I don't
know what the Treasury Department may have done.

I would be surprised, because there's -- there's no news about
making adjustments in holdings. Banks do that. Our policy is very
clear in terms of the strong dollar. We, obviously, have been
concerned about the deficits, and the President has been very -- and
the impact that can have in confidence in the dollar. And the
President has been very clear that we're addressing that in terms of
the tough budget he set up in the short-term, and then deal with the
entitlement overhang in the long-term. So, policy here is pretty
clear.